‘The markets’ stopped their tantrum at the expected election results relatively quickly, and Ms.Merkel has already sketched the outline of a sensible compromise with the French president. Mr.Hollande must accept that the fiscal pact agreed by 25 out of 27 members, setting out the rules of budget discipline, must be enshrined in national legislation and cannot be renegotiated. Like all international treaties, it cannot be rewritten for each national election, says Quentin Peel, in a comment which shows just how spectacularly he misses the point of what is happening here.
In exchange he says, Ms.Merkel will be flexible in beefing up a ‘growth pact’ to run alongside it, linked perhaps by an annexe to the original treaty. She wants it to be financed with money already committed. An increase in bank capital, unsurprisingly among measures in the bottle marked ‘growth’ and sending money to big companies via infrastructure projects, with a bit of addendum saying ‘cash strapped’ countries should not er… be spending money on big white elephant infrastructure programmes.
Germans insist this is just moving to phase 2. I am sure they do. Apparently, Francois Hollande also presents an opportunity for Ms.Merkel to borrow some policies from ‘the left’ in time for re-election, and let out her austerity belt so she can extract electoral benefit from the word growth they hope will detoxify austerity and the demise of neo liberalism.
Nick Gartside, told the FT concerns about Hollande were overblown, that Greece can’t form a government which will give legitimacy to what is happening there, was never a shocker.
I wish to make clear, it is not that I disagree with Quentin Peel’s analysis, which is why it lifted it almost verbatim. I just don’t think he understands that voters across Europe also know this pattern quite well now. That’s why western democracy is in crisis right now. Francoise Hollande only has to obtain agreement on the growth pact alongside the austerity pact, and he has done everything he set out to do and can claim the political adroitness expected.